Xerium Technologies, Inc. (NYSE:XRM), a leading global manufacturer of clothing and roll covers used primarily in the paper production process, today reported results for its second quarter ended June 30, 2008.

“The transformation that we began in early 2008 is starting to show results,” said Stephen Light, President, Chief Executive Officer and Chairman. “While the market continues to remain challenging, we believe we have improved our ability to compete effectively. We anticipate that most of the hard work to restructure certain operations and execute an amended credit agreement is now largely behind us. We’ve begun to reduce working capital as Xerium’s employees remain focused on delivering the results we expect in our new business plan and paying down our debt.”

SECOND QUARTER FINANCIAL HIGHLIGHTS

For the second quarter 2008, compared to the second quarter 2007:

• Net sales for the 2008 quarter were $170.4 million, a 10.9% increase from net sales for the 2007 quarter of $153.7 million. Excluding the currency effects shown in the table below, second quarter 2008 net sales increased 2.8% from the second quarter of 2007, with a decline of 1.8% and an increase of 12.2% in the clothing and roll covers segments, respectively.
• Gross margins were $68.8 million or 40.4% of net sales for the 2008 quarter, compared to $64.2 million or 41.8% of net sales for the 2007 quarter. Meanwhile, the Company believes it is now beginning to get initial traction on its cost reduction initiatives to offset the negative effects of pricing, currency, and cost inflation.
• Income from operations declined by 25.9% to $17.7 million for the 2008 quarter from $23.9 million for the 2007 quarter. During the second quarter of 2008, the Company expensed approximately $5.2 million to general and administrative expenses in connection with the amendments to its credit facility. In addition, for the second quarter of 2008, restructuring and impairment expenses increased by $1.5 million to $2.7 million from $1.2 million in the second quarter of 2007.
• Net income increased 83.1% to $14.1 million or $0.31 per diluted share for the 2008 quarter, compared to net income of $7.7 million or $0.17 per diluted share for the 2007 quarter. The increase in net income was largely due to a $13.7 million pre-tax, non-cash credit to interest expense reflecting the mark-to-market increase in the fair value of the Company’s interest rate swaps (compared to a $0.1 million such credit in the second quarter of 2007). Net income was negatively affected by the $5.2 million pre-tax expense previously noted in connection with amendments to the credit facility.
• Net cash generated by operating activities was $11.2 million for the 2008 quarter, which compares to $14.8 million for the 2007 quarter. Cash provided by operating activities was decreased by approximately $4.4 million related to amendment costs in the second quarter of 2008. The Company has reduced working capital from 30% of revenues in the year-ago quarter to 27%.
• Adjusted EBITDA (as defined in the Company’s amended credit facility) was $50.2 million for the 2008 quarter, compared to $38.2 million for the 2007 quarter. See “EBITDA and Adjusted EBITDA Reconciliation” below.
• In order to improve performance, the Company continues to target a reduction in days of receivables and increases in inventory turns and days of payables outstanding. During the 2008 quarter, as compared with the 2007 quarter, the Company reported that accounts receivables, as measured as a ratio of days of receivables, improved from 63 days to 59 days, inventory turns improved to 3.4 versus 3.2 and days of payables improved to 41 days versus 35 days.
• Cash on hand at June 30, 2008 was $25.4 million, compared to cash on hand at March 31, 2008 of $31.0 million. Cash on hand at June 30, 2007 was $24.7 million.
• During the 2008 quarter, Xerium made senior debt principal repayments of $2.3 million. During the six months ended June 30, 2008, the Company made senior debt repayments of $13.5 million.
• Capital expenditures during the 2008 quarter were $8.8 million, compared to $7.3 million during the 2007 quarter. As previously disclosed, the Company has slowed the pace of planned capital expenditures for its Vietnam facility and does not expect to begin production until 2009. The Company expects that capital expenditures will be in a range of approximately $38 to $44 million in 2008, and that capital expenditures in 2009 will be lower than those for 2008.

OTHER HIGHLIGHTS

• As announced on May 30, the Company secured a fifth amendment to its existing $700 million senior credit facility, which requires that the Company comply with revised operating controls and financial covenants. The term loan portion of the credit facility matures in 2012 and the revolving credit portion matures in 2011, which is unchanged in the credit facility amendment.
• On August 4, 2008, the Company’s independent registered public accounting firm, Ernst & Young LLP, removed the going concern explanatory paragraph from its audit report on the Company's financial statements as of December 31, 2007 and 2006 and for each of the three years in the period ended December 31, 2007.

SEGMENT INFORMATION

The following table presents net sales for the second quarter of 2008 and 2007 by segment and the effect of currency on pricing and translation on second quarter 2008 net sales:

(in millions):

CLOTHING SEGMENT HIGHLIGHTS

• Clothing segment sales during the second quarter of 2008 increased $6.4 million, or 6.2%, to $109.3 million, from $102.9 million in the year-ago quarter, primarily from the favorable currency effects of $8.3 million and increased sales in Asia-Pacific, partially offset by decreased sales in North America and Europe. Net sales excluding the effects of currency decreased approximately 1.8%.
• Overall pricing levels in the clothing segment decreased approximately 1% during the 2008 quarter, compared to the prior-year period.
• Clothing segment earnings for the quarter increased 6.1% to $27.9 million for the 2008 quarter, compared to the prior-year quarter.

ROLL COVERS SEGMENT HIGHLIGHTS

• Roll covers segment sales during the 2008 quarter increased $10.3 million, or 20.3%, to $61.1 million from $50.8 million in the 2007 quarter, due to $4.1 million of favorable currency effects on non-U.S. Dollar sales and increased sales in Europe, North America and Asia-Pacific.
• Overall pricing levels in the roll covers segment decreased by less than 1% in the 2008 quarter, compared to the prior year period.
• Roll covers segment earnings for the quarter increased 9.2% to $15.5 million for the 2008 quarter, compared to the prior-year quarter.

CONFERENCE CALL

The Company plans to hold a conference call to discuss these results tomorrow morning:

Date: Thursday, August 7, 2008

Start Time: 8:00 a.m. EDT

Domestic Dial-In: +1-800-706-7741

International Dial-In: +1-617-614-3471

Passcode: 32137232

To participate on the call, please dial in at least 10 minutes prior to the scheduled start.

NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA and EBITDA are not measures of performance under generally accepted accounting principles (“GAAP”); they are non-GAAP financial measures. Xerium Technologies uses these measures as supplementary non-GAAP financial measures to assist in evaluating liquidity and financial performance, specifically in evaluating the Company's ability to service indebtedness and to fund ongoing capital expenditures. Xerium Technologies' credit facility includes covenants based upon Adjusted EBITDA. If Adjusted EBITDA declines below certain levels, the Company could go into default under the credit facility or be required to prepay the credit facility. Neither Adjusted EBITDA nor EBITDA should be considered in isolation or as a substitute for net cash provided by operating activities (as determined in accordance with GAAP) or income from operations (as determined in accordance with GAAP). For additional information regarding Adjusted EBITDA and EBITDA, and a reconciliation of such measures to the most comparable financial measures under GAAP, please see below. The information in this press release should be read in conjunction with the financial statements and footnotes contained in our documents to be filed with the Securities and Exchange Commission.

About Xerium Technologies

Xerium Technologies, Inc. (NYSE:XRM) is a leading global manufacturer and supplier of two types of consumable products used primarily in the production of paper: clothing and roll covers. The Company, which operates around the world under a variety of brand names, utilizes a broad portfolio of patented and proprietary technologies to provide customers with tailored solutions and products integral to production, all designed to optimize performance and reduce operational costs. With 35 manufacturing facilities in 15 countries around the world, Xerium has approximately 3,700 employees.

FORWARD-LOOKING STATEMENTS

This press contains forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. In some cases, forward-looking statements can be identified by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other comparable terminology. Undue reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors that are, in some cases, beyond our control and that could materially affect actual results, levels of activity, performance, or achievements. Factors that could materially affect our actual results, levels of activity, performance or achievements include the following items: (i) our revenues and profitability could be adversely affected by fluctuations in currency exchange rates; (ii) our profitability would be reduced by a decline in the prices of our products; (iii) our profitability could be adversely affected by fluctuations in interest rates; (iv) we may not be able to develop and market new products successfully or we may not be successful in competing against new technologies developed by competitors; (v) our credit facility contains restrictive covenants, including covenants requiring compliance with minimum interest coverage and fixed charge coverage ratios and maximum leverage ratios, that will require us to improve our performance over time in order to comply therewith; (vi) we may have insufficient cash to fund growth and unexpected cash needs after satisfying our debt service obligations due to our high degree of leverage and significant debt service obligations; (vii) we are subject to the risk of weaker economic conditions, including without limitation those affecting the paper industry, in the locations around the world where we conduct business, including current turmoil in the credit markets; (viii) we may be required to incur significant costs to reorganize our operations in response to market changes in the paper industry; (ix) we are subject to the risk of terrorist attacks or an outbreak or escalation of any insurrection or armed conflict involving the United States or any other country in which we conduct business, or any other national or international calamity; (x) we are subject to any future changes in government regulation; (xi) we are subject to any changes in U.S. or foreign government policies, laws and practices regarding the repatriation of funds or taxes and (xii) those other risks described under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the period ended December 31, 2007 filed with the Securities and Exchange Commission and subsequent SEC filings. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. Any forward-looking statement in this press release reflects our current views with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, growth strategy, and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise.

EBITDA is defined as net income (loss) before interest expense, income tax provision (benefit) and depreciation and amortization. Adjusted EBITDA is defined in our credit facility and is EBITDA plus (i) , restructuring or related impairment costs (not to exceed $12.0 million in the aggregate for 2007 and $5.0 million in the aggregate in each year thereafter, (ii) reserves for inventory in connection with plant closings, (iii) stock-based and other non-cash compensation charges, charges from forgiveness of loans made to employees in connection with the purchase of equity and any tax gross-up payments made in respect of such loan forgiveness in connection with or prior to the completion of our initial public offering, (iv) certain transaction costs, including costs incurred in connection with our initial public offering and the related debt financing, the legal reorganization of Brazilian subsidiaries and the preparation and closing of the existing credit agreement, (v) consolidated amendment/termination costs, which consist of costs incurred in connection with the consummation of the fourth and fifth amendments to the senior credit facility and the termination of the employment contract of the former Chief Executive Officer and transition to the new Chief Executive Officer, not to exceed $8.0 million in the aggregate, (vi) costs associated with payments to management prior to the completion of our initial public offering in connection with the termination of incentive plans, (vii) non-cash charges resulting from the application of purchase accounting, (viii) non-cash expenses resulting from the granting of stock options, restricted stock or restricted stock unit awards under equity compensation programs solely with respect to our common stock and (ix) expenses incurred not exceeding $7 million per year as a result of the repurchase, redemption or retention of our own common stock earned under equity compensation programs solely in order to make withholding tax payments. For certain historical periods, the amended credit agreement specified Adjusted EBITDA is $35,610, $36,514 and $38,431 for the quarters ended March 31, 2008, December 31, 2007 and September 30, 2007, respectively. For the quarter ended March 31, 2008, the amount reflects an increase of $800 over the originally disclosed amount in the first quarter of 2008 related to the transition to the new Chief Executive Officer. Adjusted EBITDA, as defined in the credit facility and calculated below, may not be comparable to similarly titled measurements used by other companies. The following table provides reconciliation from net cash provided by operating activities, which is the most directly comparable GAAP financial measure, to EBITDA and Adjusted EBITDA.

SBG Investor Relations
Geoffrey Buscher, 508-532-1790
IR@xerium.com